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Intel & AMD Decide To Stop Fighting

Phoronix: Intel & AMD Decide To Stop Fighting

Intel and AMD have jointly announced this morning that they have decided to stop fighting each other and have settled all outstanding legal disputes. These fights, of course, have been over anti-trust litigation, patent disputes, and other matters that have been burdening both companies for the past years. As part of this settlement, Intel will be paying AMD an amount of $1.25 billion USD and both companies have agreed to a new 5-year cross license deal...

I guess the critical question is whether this indicates a general shift in Intel's attitude toward doing business ("Intel has also agreed to abide by a set of business practice provisions") or merely the beginning of collusion with AMD (previously, big payments were an incentive for "strategic alignment" with Intel).

Yesterday's closing market cap was 3.5~ billion with 670.3 million shares at a price of ~5.32. If the payoff is 1.25 billion, why doesn't their market cap, and by extension share price, increase by at least that amount?

By my math, the 1.25 billion is 35% of 3.5~ billion market cap. Why has the stock increased only 22%?

Yesterday's closing market cap was 3.5~ billion with 670.3 million shares at a price of ~5.32. If the payoff is 1.25 billion, why doesn't their market cap, and by extension share price, increase by at least that amount?

By my math, the 1.25 billion is 35% of 3.5~ billion market cap. Why has the stock increased only 22%?

There are many possible explanations. One likely reason is that the previous price already included the investor's expectations for the outcome of any settlements. Since there was still a large jump, this means that a positive outcome for AMD was not fully expected, but since it did not equal the 35% that some investors did think that AMD would profit from the Intel conflict. Remember that stock prices reflect the FUTURE earning potential for a company.